5 ways advisors can get more out of HSAs

The contribution limit for health savings accounts went up, creating an occasion for advisors to remind clients of the advantages these plans can bring — far beyond simply paying for medical expenses.

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The IRS’ limit on HSA contributions increased by $100 to $4,500 for individuals — and by $250 to $9,000 for families — for tax year 2027.

Clients can only contribute to health savings accounts, or HSAs, if they have a high-deductible health plan, whereas flexible spending accounts, or FSAs, have broader uses but a downside that clients can only carry over a portion of their balances from year to year, currently limited to $680 from 2026 to 2027.

Know about federal tax law changes

A federal law enacted in July 2025 expanded HSA eligibility to include high-cost exchange-based plans, direct primary care arrangements and telehealth services.

READ MORE: The big changes to HSAs and what they mean for planning

Don’t miss out on investment opportunities

If clients have enough saved in their HSAs, usually a minimum balance of $1,000 to $2,000, they could consider making investments. Only 15% of account holders invested their funds, according to a June 2025 report from the Employee Benefit Research Institute.

One advisor, Filip Telibasa, owner of Benzina Wealth in Sarasota, Florida, recommended clients invest the portion of the account balance that exceeds their health insurance deductible.

Having an employer contribution can encourage investing, but some account holders are discouraged by the hassle involved or the investment options available. Others might be unaware of the possibility of investing.

READ MORE: Vast majority of HSA savers skip the investing option

Consider HSAs a type of retirement savings account

One potential strategy is to grow an HSA enough, through savings and investments, to use it for nonmedical withdrawals in retirement. Although early nonmedical withdrawals are subject to a 20% penalty as well as taxes, there is no penalty after age 65. Still, nonmedical withdrawals after age 65 are taxed like traditional IRA withdrawals.

One strategy is to pay out of pocket for medical expenses while leaving the HSA alone and growing it as much as possible through savings and investments.

READ MORE: $1M in HSA is a rosy projection. But smaller savings still pay off

Be careful of Medicare and other rules

Despite those advantages, advisors and their clients should still consider Medicare rules. If a client enrolls in Medicare at age 65, at first eligibility, they might be charged a 6% excise tax for excess HSA contributions, so they should cut off HSA contributions before enrolling in Medicare. Advisors and clients should also work to avoid possible tax hits to nonspouse heirs in estate planning.

Meanwhile, HSA withdrawals do not affect taxes on Social Security benefits and, unlike traditional individual retirement accounts, are not subject to required minimum distributions.

READ MORE: How HSAs pay off in retirement — with caveats

Reap the rewards of triple tax advantages

Overall, HSAs are worth consideration for advisors and their clients because of the triple tax advantages: lowering pretax income by contributing, then growing the accounts tax free and finally making tax-free withdrawals.

READ MORE: Tips for using a ‘medical IRA’ that offers triple the tax savings